Time For An Inward-looking Agriculture Export Policy

Edible Oil Imports in India

As discussed in our previous blog, India’s Agriculture Export Policy should incentivise domestic agri producers to produce value-added agri products to fuel the country’s increasing appetite for premium products on account of a fast-rising middle class. The case of Edible Oil consumption in India is a good example.

India is a prominent player in the global Oilseeds industry with a 10% share in worldwide production. However, the demand for Edible Oil in India is more than its domestic production. The foreign exchange outgo on account of Edible Oil import of about 15 million tonnes is pegged at a hefty $11 Billion (Rs. 77,000 crore). Despite imposing increased import duties, Edible Oil imports are likely to continue rising in near future owing to an ever-increasing demand.

Considering this rising demand for imported Edible Oil and the fast-rising income of our growing middle class, Indian Oilseed farmers should be reaping the benefits. However, this does not seem to be the case as the acreage under Oilseeds continues to remain the same or decline, resulting in stagnant production. The key culprit for this is the lack of remunerative prices for the farmers in our country.

As per the Oilmeals (the raw commodity used to extract Edible Oil) export data compiled by the Solvent Extractors Association of India (SEA) – India’s apex association of Vegetable Oil Trade, the export of Oilmeals during October 2018, provisionally reported at 84,143 tonnes, dropped down by 58% compared to 200,158 tons in October 2017. At the same time, India’s Edible Oil imports in October 2018 rose by 3.5% to 11.74 lakh tons from 11.34 lakh tons in Oct 2017.

The need of the hour is to have a well-coordinated, inward-looking Agriculture Export Policy that cohesively looks at both exports and imports from the same prism rather than in silos.

Use of market mechanisms like Commodity Futures & Options, Electronic Spot Commodity Markets and Modern Storage Infrastructure & Logistics would help in enhancing efficiencies of commodity supply chains in India, thereby helping farmers get better realisations for their produce. Better prices would encourage farmers in the country to produce empire Oilseeds, thus significantly reducing the foreign exchange outgo and benefitting our farmers.

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